Lobbyist Charged in Fraud Inquiry

A federal investigation of corrupt lobbying practices on Capitol Hill intensified Friday as a former business associate of lobbyist Jack Abramoff signaled that he would plead guilty to a charge that the two conspired to defraud four Indian tribes out of millions of dollars and to improperly influence a member of Congress.

The plea deal, which is expected to be formalized early next week and includes Michael Scanlon’s promise to cooperate with federal prosecutors, marks a major development in a widening probe of Abramoff that has shaken Congress.

In an eight-page criminal information filed in U.S. District Court, federal prosecutors charged that Scanlon, 35, worked with Abramoff to extract $52.9 million in fees from the Indian tribes under false pretenses. The two then secretly shared nearly $40 million in profits, prosecutors charged.

The criminal information, a form of criminal charge that is usually a prelude to a plea agreement, also said that Scanlon and Abramoff illegally conspired to influence a member of Congress. The member of Congress is identified in the information only as “Representative #1,” but details of the charges described specific actions known to have been taken by U.S. Rep. Bob Ney (R-Ohio).

Ney spokesman Brian J. Walsh said the congressman would “fully cooperate in the investigation of the Abramoff matter. He has not been told that he is the target of any investigation, and there would be no grounds to do so.”

Ney has repeatedly denied any wrongdoing.

Scanlon’s cooperation could help break open the criminal investigation into Abramoff and his dealings with members of Congress and the administration. His insider’s knowledge could be invaluable in developing criminal cases.

Scanlon was a top aide and communications director to Rep. Tom DeLay (R-Texas) when DeLay was House majority whip. Scanlon left the congressional payroll in late 1999, and later teamed up with Abramoff, who was once one of the most influential lobbyists in Washington. Scanlon faces a single charge of conspiracy.

In a statement, Scanlon’s attorney, Stephen Braga, said that at a court hearing Monday, “Mr. Scanlon and the Department of Justice will present a proposed plea agreement to the court to resolve the charge contained in the information.”

Abramoff, who was not charged in the documents made public Friday, declined to comment through a spokesman.

In August, Abramoff was indicted by a federal grand jury in Florida on six counts of fraud and conspiracy relating to his role in the purchase of a fleet of gambling boats. He has pleaded not guilty.

The Abramoff investigation has caused widespread worry in Congress because the onetime lobbyist maintained broad connections among lawmakers.

Abramoff arranged for a Scottish golf outing for DeLay -- a trip that DeLay has asked the House Ethics Committee to review after questions were raised about the trip.

He courted other congressmen by letting them use his skyboxes at sports events. A former deputy interior secretary recently had to testify before the Senate Indian Affairs Committee about his relationship with Abramoff. A nominee for a top Justice Department post withdrew after questions were raised about his dealings with Abramoff.

Prosecutors charged that as part of the scheme with Scanlon, Abramoff, who was identified only as “Lobbyist A,” recommended to the four tribes that they hire Scanlon to perform grass-roots work in support of their casino gambling efforts.

Scanlon would charge the tribes “prices that incorporated huge profit margins” and then secretly split the profits with Abramoff, the information said. The two concealed the kickback arrangement from the tribes, it charged.

The criminal information also detailed an alleged corruption scheme involving “Representative #1,” considered to be Ney.

The information charged that Scanlon and Abramoff “together and separately provided a stream of things of value” to the congressman and members of his staff, including “a lavish trip to Scotland to play golf on world-famous courses,” tickets to sporting events and meals at a Washington restaurant Abramoff owned, as well as campaign donations.

The congressman agreed to “perform a series of official acts” that benefited clients of Scanlon and Abramoff, prosecutors charged. These included “agreements to support and pass legislation [and] agreements to place statements in the Congressional Record.”

According to the criminal information made public Friday, Scanlon and Abramoff also conspired to influence the congressman to advance the application of one of Abramoff’s clients to win a license to provide wireless telephone services to the U.S. House.

It was Ney, chairman of the House Administration Committee, who awarded a licensing agreement worth an estimated $3 million to Foxcom Communication on Nov. 26, 2002. Abramoff’s firm later reported that it was a lobbyist for Foxcom, now renamed Mobile Access Networks.

Ney, through a spokesman, has denied allegations that he acted inappropriately in awarding the license to Foxcom. Other bidders for the contract have alleged that the selection process was flawed and politicized.

Federal law and House ethics rules bar members or their staff officials from taking anything of value in return for the performance of official acts.

The House ethics manual states, in capital letters: “Members and staff may never solicit a gift, or accept a gift that is linked to any action they have taken or are being asked to take.”

Ney, who has formed a legal defense fund and hired an attorney, acknowledged recently that he had been subpoenaed as part of the Abramoff investigation.

Scanlon is the second person charged in the federal criminal investigation stemming from Abramoff’s lobbying activities.

Last month, David Safavian was charged in an indictment with obstructing a federal investigation and making false statements to a federal investigator when he was questioned about a trip he took as Abramoff’s guest while serving as a top official in the U.S. General Services Administration.

Safavian resigned his federal post in the White House Office of Management and Budget shortly before being arrested on the charges. He has entered a not-guilty plea.

According to the federal information made public Friday, the four tribes allegedly defrauded by Scanlon and Abramoff were located in Mississippi, Michigan, Texas and Louisiana; and the profits the lobbyists drew from each tribe ranged from a little over $1 million to $12 million.